The unemployment rate and its dynamics
Full employment by no means implies 100% employment of the entire number of adult able-bodied population. There is a level of unemployment that is considered justified, or normal.
The unemployment rate is presented in the form ofpercent of the unemployed able-bodied population, which do not include pensioners, students, prisoners, and citizens under 16 years of age, to the workforce, including those employed in military service. With full employment, the unemployment rate is equal to the levels of frictional unemployment and the structural one in the amount, i.e. the natural level of unemployment, which is a complex of structural and frictional unemployment, while the unemployment rate is closely related to the stability of the economy, when the level of expected inflation corresponds to the actual level, and when the actual national product is at a natural level.
The dynamics of the unemployment rate, its changesare obtained by comparing unemployment rates in different years. The dynamics of the unemployment rate is directly correlated with the dynamics of GNP. A 2% increase in the actual GNP makes it possible to reduce unemployment by 1% and, conversely, the unemployment rate will increase by about 1% as a result of a 2% decrease in the actual GNP. Therefore, unemployment is a natural state of the labor market, but it is allowed to fluctuate from the natural rate.
The production capacities for cyclical unemployment are not used in full and the GDP value, respectively, is less than that which would have been at full employment.
Between the GDP gap and cyclical unemployment A. Oaken empirically discovered a direct, stable relationship. The law of Oaken shows the ratio between the shortfall in the volume of GDP and the level of unemployment.
Levels of unemployment and employment are importantmacroeconomic indicators that determine the effectiveness of economic policies pursued by the state. State regulation is carried out by a set of legislative, economic, administrative and organizational measures aimed at achieving production efficiency through full employment. For increase level of employment, carries out state regulation of the marketlabor and employment. Along with direct impact on the labor market, the state uses indirect methods, including monetary, taxation and depreciation policies.
Statistics show that between employment and inflation, there is feedback, otherIn words, this relationship extends to the general level of prices and unemployment. It is worth noting that inflation is inflation of prices, in other words - a decline in the purchasing power of a monetary unit, its depreciation. Price growth is observed if the rate of increase in money supply in circulation is higher than GDP growth. The reduction in GDP accelerates the increase in the money supply. Inflation, in turn, has a negative impact on wages. A.U. Phillips revealed a pattern between the share of the unemployed and the change in nominal wages. A.U. Phillips, examining the correlation between inflation and unemployment, found that there is an inverse relationship between the amount of unemployment and the rate of price growth. Its graphic image was called the Phillips curve. According to the Phillips curve, unemployment is high with insignificant inflation, and as inflation increases, it decreases. Based on the Phillips curve, it is assumed that it is possible to reduce unemployment in an inflationary environment or to increase unemployment by suppressing price increases. However, in the real economy, the results of this curve are not always reflected.
The general level of prices and unemployment is studied in:
a) micro and macroeconomics;
b) normative and positive economic theory.